Outsourcing in a digital world (1)

Editor's Notes

• #3 Today, the operational functions of research, development and production are increasingly shifting their planning and design processes to virtual spaces. If, for example, production is planning and designing new products in a virtual space, participating employees must then actively contribute to the development of products and solutions in these virtual processes, especially in view of the often cited early integration of procurement. Buyers must possess the virtual competence necessary to properly manage suppliers in these virtual spaces. And not only for that. Progressively growing digitalization means procurement managers are increasingly active in virtual catalogs, marketplaces and platforms. Current surveys show that the percentage of operational buyers (B2B) who purchase goods online is growing drastically, most recently from 57 percent (2013) to 68 percent (2014). Technologically, digital avatars can conceivably provide a virtual, photorealistic viewing of supplier locations and operations. By wearing a virtual reality headset, the buyer can view onsite supplier production from the comfort of his/her office. The signs of the times point in this direction. In the real estate as well as the tourism industries, for example, such technology is currently being dubbed an “industrial revolution”. Viewing apartments with virtual data goggles open up a whole new range of opportunities. In the face of dwindling vacation time, the tourist industry is currently speculating on so-called digital tourism as a contemporary supplement to, and substitute for, actual tourist travel. To the extent that digital transformation is also transforming our society into a knowledge society, our economy is likewise changing into a knowledge economy, or even into a “human economy”, where not only intellect, but especially creativity, passion, character and team spirit will make the difference. To an even greater extent than they are today, buyers will become experts on the procurement of professional services such as creative services. To achieve this, procurement would have to cooperate much more intensively with other internal functions such as human resources, engineering, and research and development and all other business units
• #4 Never before has there been a more powerful influence on human behaviour, irrespective of country or culture, than the combined effect of digital technologies. People are always surrounded by images and links related to staying connected and being in the know through cell phones, and other devices. The advancements in in technology have made it possible for anyone to work for a company based in London yet live in Spain. Digital Platforms deliver immense value, enabling us to connect, collaborate and broaden our minds – raising awareness about important issues, bringing people together for a common purpose and achieving new breakthroughs. Digital Business is mainly used in context of digital transformations, holistic business optimization, disruption and integration convergence. A key part of all digital business is information put to work, which requires a holistic information management approach, connecting value to create more value, throughout the entire ecosystems.
• #5 AI and Advanced Machine Learning are composed of many technologies and techniques ( e.g. deep learning , neural networks, natural language processing. All have moved beyond traditional rule-based algorithms to create systems that understand learn, predict, adapt and potentially operate autonomously. This is what makes smart machines appear intelligent Intelligent apps such as VPAs perform some functions of a human assistant making everyday tasks easier( by prioritizing e-mails, for example) and its users more effective ( by highlighting the most important content and interactions. Over the next 10 years, virtually ever app, application and service will incorporate some level of AI and machine learning for Apps Intelligent Things refer to physical things that go beyond the execution of rigid programing models to exploit applied AI and machine learning to deliver enhanced behaviours and interact more naturally with their surroundings and with people Virtual and Augmented Reality are immersive technologies that transform the way individuals interact with one another and with software systems, AR and VR capabilities will merge with the digital mesh to form a more seamless system of devices capable of orchestrating a flow of information that comes to the user as hyper personalized and relevant apps and services Digital Twin is a dynamic software model of a physical thing or system that relies on sensor data to understand its state, respond to changes, improve operations and add value Block-chain and Distributed Ledgers are methods in which value exchanges transactions are sequentially grouped into blocks. Each block is chained to the previous block and recorded across a peer to peer network. While the current hype is around the financial services industry, there are many possible applications including music distribution, identity verification, title registry and supply chain. Conversational Systems is focused on chatbots, and microphone enabled devices Mesh App and Service Architecture, mobile apps, web apps, desktop apps and loT apps link to a broad mesh of back end services to create what users view as and “application”. The architecture encapsulates services and exposes API’s at multiple levels and across organizational boundaries balancing demand for agility and scalability of services with composition and reuse of services. Digital Technology Platforms provide basic building blocks for digital business and are a critical enabler to become a digital business. These building blocks enable information systems, customer experience, analytics and intelligence. Adaptive Security Architecture . The digital world platforms and architectures create and ever more complex world for security. The digital world is a new frontier for many It security professionals creating new vulnerability areas and often requiring new remediation tools and processes that must be factored into any digital world sourcing practice,
• #6 Outsourcing is most mature in the Information Technology sector ( ITO ) from its small beginnings in the 1980’s ITO has evolved into a sophisticated global market, and no matter how traditional companies business models are, most companies have outsourced one or more layers of their IT functions. ITO has expanded to include Cloud, and permutation of Cloud such as Saas Software as a Service, Iaas Infrastructure as a Service, Paas, Platform as a Service, and the newest entrant Caas Connectivity as a Service. IT Outsourcing has always been a complex exercise, in part due to the requirement to bundle IT into “services” combining hardware, software, people and processes. These services (towers) often contain data centre, end user computing, service desk, application development and maintenance, and voice and data network packages. For traditional IT outsourcing there have always been intricacies in transferring staff, novating contracts, risk assessments and assessing the financial impact of selling physical assets or relinquishing control of transactional or strategic processes. The risk aspect in both regulated and non-regulated industries is expanding exponentially as the aas ( as a service offerings take a greater share of the outsourcing market. Many businesses require there service providers to keep pace with ever changing legislations such as SOC 1 and 2 requirements, ISO 27001, 2, 14, Protection of Privacy Acts, EU 2016/79 General Data Protection Directive, Local and Global tax implications, IFRS, Homeland Security and Patriot Acts to name a few. Many more are evident as you expand your theatre of operations and servicing countries.
• #7 Horizontal BPO focuses on the delivery of classic, back office business support functions such as Finance and Accounting (F&A) and Huma Resources. Industry Specific BPO is a rapidly emerging sector given the move to digital transacting, including a host of offerings on the internet. BPO has expanded into on shore in house specific areas such as Payroll, Claims processing, loan origination credit reporting, mortgage processing, order processing, payment processing, and many more. Sometimes perceived as a simpler proposition given its focus on non-strategic transactional processes when compared to ITO, BPO faces its own unique challenges. These are primarily driven by relative immaturity of BPO service providers changing landscape to niche service providers from one stop shopping providers ( all or nothing) particularly in the industry specific arena. The consequences of all factors, regulatory and non regulatory and the increasing risk factors are shortening deals to an average of 5 years with segmentation of service providers with advent of the digital world and as a service offerings.
• #8 Speed of Development following a start up or carve out, a new business can use all the new outsourcing to put in place key functions much more quickly and cheaply than developing an in house capability from scratch. Cloud and as a service models leverage industry standards and plug and play capability Flexibilty: Outsourcing can provide the flexible capacity that a rapidly growing or declining business may need to keep pace with changing demand and technological change Specialist skills In specialist areas suc as I, Payroll and multi country environment, attracting, developing and retaining skilled staff can be a real challenge: outsourced providers can offer access to these scarce resources or changing skills requirements. Training and adoption to the areas of dynamic digital changes in the market are barriers to in-house solutions versu niche market suppliers. Political Manoeuvering offshoring, right shoring can be a sensitive topic especially with regulated industries. Outsourcing to a provider that can draw on its own near shore and off shore capabilities often can be a politically acceptable way of achieving the same end. Global companies are now beginning to employ new make or buy matrices using there own technology, networks and right shore capabilities. Following the 80’s in moving manufacturing, companies are now moving ITO and BPO services within there own service geographies depending are regional and country political economic diversities Risk Aversion is now becoming one of the greatest driver in the digital world, maintaining network stability, security and the amount of regulations, laws and statures that pertain to information flow, companies are finding it exceedingly difficult to fund the necessary controls alone without going to established service providers who leverage larger client base to fund more robust DR, BC, CS programs and delivery networks. Customer Satisfaction is gaining as one of the key levers with the adoption of the various generations fRom Baby Boomers to Post millennials adopting and sustaining legacy platforms for the appropriate take-up of product and services is now a key challenge as each generation has developed different cultural styles in the consumption of products and services in this digital world.
• #9 A comprehensive approach in general covers 6 to 8 phases or more of general activities in the lifecycle of outsourcing. Access Define Objectives and Assess capacity Due Diligence : legal, regulatory, local regional global, Technology, Assets managed or assumed Prepare : Service Definition, KPI’s SLA’s Future Proofing RF(X) creation Evaluate: Response evaluation and supplier selection IT – and Outsourcing vendor maturity evaluation SIG Shared information Gathering Commit: Contract development and finalization Transition and Transformation: New Service implementation Optimise: Ongoing supplier and vendor management (SRM) There are many streams of work associated with each of the phases as well as using Category Management, Six Sigma, Lean, Integrated Supply chain practices structures approach to sourcing etc…. Failure to do so often results in getting your same mess for less originally, however over time your costs will go up because of the transfer of your business processes to an outside agency
• #12  The world … … has changed dramatically. In the meantime, there are more robots and artificial intelligence (AI) than people on earth. Both of these technological advancements have become so crucial to economy, administration and society, that AI personality rights are being implemented. Technology … … is omnipresent in everyday production and consumption. The keyword is ubiquitous computing (UbiComp). Cross-industrial corporate networks are fully transparent. Prices for products, services and raw materials can be accessed in real-time from the cloud. Risk management is fully automated and in real-time. Companies … … produce goods in a predominantly uninhabited, machine-operated world. Almost all processes are digitalized and automated. This results in a new, decentralized organizational paradigm for the economy. Strictly speaking, corporate headquarters no longer exist. Controlling and monitoring are spatially separated from production. The working environment … … is characterized by polarization. Algorithms have replaced humans for all information processing jobs – particularly office jobs. While middle and lower management have ceased to exist, an elitist top-management class and a host of operational system supervisors has emerged. Value creation … … is decentralized to many production shops, producing for all industries and scattered around the globe. This is made possible by, among other things, the rapid spread of 3D printing. For example, one day factory shops print a chassis for the automotive industry and on the next they print components for the prefab construction industry. Security … … is at an even greater risk than it is today. The automated world offers a multitude of potential gateways for hackers and industrial criminals. One of the main tasks of people in this world is to ensure safety and stability. Therefore, most corporate jobs serve to monitor and improve processes and systems.